Author: omniadmin

So, you found a practice you like and it has a price tag of $500,000. How do you know the dental practice is valued correctly? A short answer is that the price, or value, is what a willing, knowledgeable and unpressured buyer along with a willing, knowledgeable and unpressured seller would be willing to exchange for a property or asset.

I can probably write a short, very boring book, on valuing a dental practice. But, no one would buy it and no one would read it. So, I’ll keep this short and if you want more information, you can call or e-mail me.

A rule of thumb:  value that is often quoted for the northwest is between 65% and 75% of the last 12 months collected production. If you’re in a metropolitan area like downtown Seattle, Bellevue, Redmond, etc., it will be on the high end, possibly more. If you’re in a rural area, you’ll be on the low end and possibly less.

When I do a formal appraisal on a practice, I use standards approved by the Institute of Business Appraisers, of which, I am a member. These methods take into account not just the collections of the practice, but more importantly, the income of the practice. Why is this? Well, would you buy a $1 million practice with a net income of $100,000, or a $500,000 practice with a net income of $200,000? Don’t answer out loud unless you’re certain of the answer.

We, at Omni, use three methods – capitalization of earnings, asset value, and production acquisition that blend three areas of the practice – earnings, assets and production, to get a true value of the practice. In summary, when you look at the price of a practice, you can start with a rule of thumb to get an idea of whether the practice is priced right. But, in the end, a full valuation is needed to determine the true value.

-Rod Johnston, MBA. CMA

 There are a few things you should be wary of when buying a dental practice. These are not necessarily deal breakers, but things to bring up and analyze with your team when you are buying a practice.

1. ALL THE TREATMENT IS DONE
You can run an unscheduled or untreated treatment plan report that should give you an idea of treatment on the books.  You can also look at the number of true active patients and compare that to the annual collections to see if there is potential treatment.   If annual collections are $500,000 and there are 1,500 active patients, there’s a good chance there’s work to be done.  If annual collections are $500,000 and there are 400 active patients, start asking questions

2. OVERPAID STAFF
Annual staff salaries typically run around 20 to 25% of the annual collections.  When you get up to the 35 to 40% area, you are in for some bad news for the staff.  An older practice with long tenured staff may have dental assistants who get annual salary increases and now their making $30/hr.The same with hygienists.  Or, they are receiving an incredible benefit package of health insurance, retirement plan, gym memberships etc.,This can be cured, but if you plan on keeping the staff, be prepared for a discussion on reducing benefits and/or pay.

3. OUT OF CONTROL COLLECTIONS 
You can typically tell how good of a job the front desk is doing by looking at the accounts receivable balances.  The total amount should not be above 125% of your monthly collections (adjusted for insurance discounts).  The insurance aging report should be pretty clean with only small dollar amounts in any of the aging buckets.  If the aging balance is too high, or the insurance aging is high, you will either need to retrain the front desk, or hire a replacement in the future.

4. SECRETIVE SELLER 
If you are asking for reports or questions from the seller and they are giving you run around answers, you may want to think about moving on.  If the tax returns do not match to the annual collections reports, something funny is going on.  You should expect straight and quick answers, unless the seller is away on vacation or overly busy.

5. EQUIPMENT NOT WORKING
I am surprised how buyers don’t have someone go through and make sure all of the equipment isn’t working.  You would hate to go in on your first day and have equipment not functioning.  The equipment supply companies will typically come out at no charge and go through your equipment to make sure it’s working.  If it looks old and in disrepair, it will give you a good peace of mind to have it checked out.

All of these red flags can be fixed, so they are not deal breakers.  But, if you do run across any of these red flags, be sure to have your team of experts, CPA, consultant, equipment rep, etc., dig a little deeper and make sure you are getting what you think you are getting.

-Rod Johnston, MBA. CMA

As you probably have seen, there are not a lot of dental practice’s for sale.  The seller’s market continues for dental practices.  The great practices get snatched up literally before they hit the market.  The practices that need a lot of work are out there, but it’s difficult to assess what you are getting.  Here are a few tips to evaluate a practice that may not be perfect, but might have some potential:

1.  Is the trend in the practice production going up by more than 10% per year for the past 3 years?  If it is that’s a good sign the practice is growing steadily.

2.  Look at the unscheduled treatment plan report.  Is there a good amount of treatment out there?  Has the doctor been diagnosing treatment, or doing a lot of “watching”.  The more treatment left for you, the better.

3.  Is there enough patients to keep you busy a minimum of 3 days per week. That typically means 500 to 600 patients.

4.  Does the practice take all the major insurances?  If not, that tell you that you can get an increase in new patients by adding more insurances.

5.  Does the selling doctor refer out a lot of treatment? – Endo, surgery, etc.,  If this is the case and you do endo and surgery, that’s a quick 10% increase in production.

6.  What’s the competition like?  Are there dentists within 3 miles?  How old are they and what are their practices like.  If they are older practices, that means those docs may be happy with their level of production and not into competing for business.

7.  Do the neighboring dentists advertise?  If not, you can beat them with strategic marketing.

8.  What type of advanced procedures does the selling dentist do?  Invisalign, implant placement, etc.  If you do these, it’s another increase in production.

9.   Are there a lot of inactive charts within the last 3 years?  You can typically activate  number of the inactive charts by aggressively calling and mailing the patients.

10.  Has the practice been remodeled recently?  A simple remodel, even painting, carpet can freshen up a practice and entice existing patients to start referring again.

The next time you’re looking at a practice that may appear run down, do a little more detective work and you may discover a diamond in the rough!

-Rod Johnston, MBA. CMA

Veterinary practice business owners have a significant opportunity to make a return on investment when they enter the marketplace and sell their business. But to maximize the value of their return, they must work with proven industry experts. In this article, the trusted team at Omni Veterinary Practice Group explains five reasons to hire a veterinary practice business expert during a veterinary practice sale.

1. Database of Buyers
Those within the marketplace will have access to a comprehensive database of practice buyers. They will have completed all due diligence on those capable of completing the transaction and have developed comprehensive business relationships within the industry. This can help streamline the business transaction and ensure sellers receive a lucrative price for their business.

2. Full Access to Marketing Channels
Specialists within the veterinary practice marketplace can help enhance sale strategies through effective marketing channels. They know the areas potential buyers look for buying opportunities and can craft refined marketing strategies designed to appeal to specific types of buyers. Their access to these highly effective marketing channels also means industry specialists can help maximize the value of the business and reduce sales roadblocks.

3. Help Selecting a Transition Plan
Working with a trusted veterinary practice sales expert also means that business owners can select their ideal transition plan when selling their company. For example, they may wish to only sell part of their practice and remain the owner of the rest of the company. Specialists within the industry can help coordinate this process and ensure that the full value of the entire organization is protected during the sale. Veterinary practice sales experts can also help coordinate sales to corporate groups by individual owners, advising the owner on their rights within the process and helping to complete the complex documentation involved within the sale.

4. Direct Access to Sales Knowledge
One of the leading reasons so many veterinary business owners are now choosing a specialist for the sale of their practice is that specialists can answer questions based on direct knowledge within the industry. They can help the practice owner decide what to do with their equipment after the sale. for example. They can also answer questions related to post-sale staff needs, as well as how to communicate with staff directly during the sale process. This eases the sales transition and ensures business owners also have an expert available to consult with throughout.

5. Creating a Valuation for the Company
By determining the value of the company, veterinary practice experts can ensure their client achieves full value for money. They can use their industry knowledge, as well as their understanding of the local marketplace, to ensure the company is valued at a level that will attract high-quality buyers and ensure a fast, and profitable sale.

By working directly with a trusted veterinary practice sales expert, veterinary business owners can maximize the return for their business investment. To learn more, speak with the team at Omni Veterinary Practice Group directly at 877.866.6053 or email info@omnipg-vet.com.

By working with trusted industry specialists, veterinary practice owners can ensure a swift profitable sale for their business. The team at Omni Veterinary Practice Group has many years’ experience within the veterinary practice marketplace. They have helped hundreds of owners understand the sales process and worked with a range of clients to ensure their practices are sold with seamless precision for lucrative returns. In this article, their experts explain the business sale process and how Omni Veterinary Practice Group prepares business owners for the sale of their veterinary practice.

1. Financial Reporting
A critical element in the sale of any business property is financial reporting. Buyers will complete due diligence on the company they are purchasing and it is important all financials are in order and ready for review. Omni Veterinary Practice Group helps business owners complete the financial reporting process. They gather the required documents and ensure the documents are completed accurately and according to the strict standards within the industry.

2. Consolidating Business Resources
During the search for a local veterinary practice for sale, buyers will be reviewing the market for practices that are lean and do not have excess resources to manage and pay for over the long-term. After assessing the finances of the practice, Omni Veterinary Practice Group works to consolidate the business’s resources, removing unnecessary expenses related to vendors, staff, and equipment and helping business owners understand the resources that are important to their company and potential future buyers.

3. Remodeling Work
In consulting with veterinary practice owners, Omni Veterinary Practice Group will advise them on potential remodeling requirements. They will guide owners on the paintwork and property upgrades required to ensure the practice is sale-ready. This process is completed alongside trusted building inspection teams that analyze all areas of the property to determine whether any upgrades are required before placing the practice on the marketplace. Any issues in the practice will be highlighted by the buyers’ representatives during their due diligence on the practice, and so sellers that finish remodeling work proactively and ensure all problems are resolved can showcase their commitment to the sale.

4. Analysis of Practice Value
When getting their veterinary practice ready for sale on the marketplace, owners must consider the optimum value for the company and how they can harness this valuation to attract the right types of buyer for the organization. Omni Veterinary Practice Group has significant experience in this area of the marketplace. They can help business owners detail the most important elements that determine a practice’s value. For example, they know that margins are more important to buyers than gross production levels. And so they can use this knowledge to value the practice at the highest rate possible according to market demand.

Omni Veterinary Practice Group is a clear leader within the local industry. To learn more on the company and their services, contact their offices directly today at 877.866.6053 or email info@omnipg-vet.com.